financial analysis

Financial analysis

Financial Analysis

Research into data relating to the stability and profitability of businesses, especially to guide one's investing practices. At its most basic, financial analysis involves looking at financial statements to determine if a company is healthy. Balance sheets are important to financial analysis as they provide a ready-made means of investigating performance. However, it is important to note that quantitative financial analysis has limits: the accounting methods a particular business employs, for example, may make it look more or less healthy than it really is. See also: Fundamental analysis.

While financial ratio analysis helps in assessing factors such as profitability, efficiency and risk, added factors such as macro-economic situation, management quality and industry outlook should also be studied in detail while investing in a stock.

Written in clear, concise language and intended for business owners or individual investors with little or no business training, the book contains 12 chapters on topics such as the four main financial statements (each receiving a separate section), financial ratio analysis, the SEC and independent audits, contemporary corporate scandals, and investment strategies.

Combined with the improved financial ratio analysis created by replacing real estate with cash without adding an equal balance sheet liability, these considerations make the sale-leaseback transaction very attractive to any corporate treasury department.

However, various efficiency techniques are increasingly mentioned in academic studies as a complement to, or substitute for, financial ratio analysis which constitutes such a large portion of the CAMELS rating system utilized by financial institution regulatory agencies in their determination of a firm's safety and soundness.

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